Dow Jones futures and S&P 500 futures rose slightly Thursday morning, while Nasdaq futures edged lower amid weakness in Facebook stock and PayPal (PYPL). The stock market rally closed mixed on Wednesday, taking big tech earnings in stride and improving modestly on the Fed meeting announcement and Fed chief Jerome Powell’s still-dovish comments.
Facebook (FB), PayPal stock, Ford (F), Qualcomm (QCOM), Align Technology (ALGN) and ServiceNow (NOW) headlined earnings reports late Wednesday.
The Robinhood (HOOD) priced its IPO at $38 a share, at the low end of expectations but raising roughly $2 billion. The Robinhood IPO values the no-fee trading app at $32 billion. It’s set to debut Thursday as HOOD stock.
The stock market rally was mixed Wednesday but the Nasdaq rose following strong earnings from Apple (AAPL), Microsoft (MSFT) and Google parent Alphabet (GOOGL). Apple stock fell modestly and Microsoft was little changed. But Google stock popped and hit a record high, also lifting Facebook stock.
Advanced Micro Devices (AMD) broke out on earnings. Fellow chipmaker Monolithic Power Systems (MPWR), which technically closed Tuesday pennies above a buy point, decisively broke out on earnings as well on Wednesday. Steelmaker Cleveland-Cliffs (CLF) cleared an early entry a few days after its strong quarterly results.
ArcelorMittal (MT) also crossed a buy point Wednesday, but that was heading into earnings early Thursday. Mittal earnings beat views, with the global steel giant also boosting a buyback. MT stock rose modestly before the open, but still in buy range.
Fed Sees ‘Progress’
The Fed meeting announcement at 2 p.m. ET said that policymakers see “progress,” but didn’t signal “substantial progress” that would indicate they have begun discussing tapering asset purchases. Fed chief Jerome Powell, in his news conference at 2:30 p.m. ET, said the economy still has a “ways to go.” He also said the U.S. has “ground to cover” before the Fed adjusts its easy money policies. He did say inflation will likely remain elevated for several months, but should moderate.
The Fed meeting and Powell’s comments didn’t surprise markets, especially given the recent rise in Covid cases and related restrictions. Powell could signal “taper talk” late next month at his Jackson Hole speech, or the trigger could come at the September Fed meeting. An actual reduction in bond buys likely wouldn’t start until late 2021 or early 2022.
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Generac (GNRC), AMD and Cleveland-Cliffs stock were highlighted in the Stock Market Today video embedded in this story.
PayPal stock, Generac and ServiceNow are on IBD Leaderboard and Long-Term Leaders. AMD stock is on SwingTrader. CLF stock, Generac and Facebook are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures climbed 0.4% vs. fair value. S&P 500 futures rose 0.2%. Nasdaq 100 futures were roughly flat. Facebook stock and PayPal are weighing on tech futures.
China’s securities regulator told brokerages that Chinese companies can still list in the U.S. as Beijing continues to try to bolster stock prices after a slew of regulatory moves across many industries hammered Chinese stocks. U.S.-listed Chinese stocks were indicated higher after rebounding Wednesday.
At 8:30 a.m. ET, investors will get their first reading on second-quarter GDP, along with weekly jobless claims.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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Facebook earnings were better than expected, but the social giant warned of slowing revenue growth ahead. FB stock fell 3% before Thursday’s open. Facebook stock rose 1.5% to 373.28 on Wednesday, hitting a fresh high intraday on the back of the strong Google earnings report. FB stock also spiked last week on blowout Snap earnings. So investors may have already priced in good Facebook earnings news.
PayPal earnings beat views but sales missed and the digital payments leader guided lower on third-quarter revenue. PayPal stock tumbled 5% to about 287 early Thursday, though that was off initial Wednesday night lows. Shares climbed 0.5% to 301.98 on Wednesday after finding support at its 21-day moving average and closing in range of a 296.11 cup-with-handle buy point. But PYPL stock is set to tumble well below that buy point and possibly test a 277.96 early entry cleared last month.
Ford earnings defied views for a Q2 loss and guided higher despite an ongoing chip shortage. Ford stock rose nearly 5% in premarket action. Shares edged up 0.5% to 13.86 on Wednesday. Ford stock is still below its 50-day line but holding near the top of a prior consolidation.
Qualcomm earnings were better than expected, with the wireless chip giant also guiding higher. QCOM stock rose 3% to nearly 147 before the open. Shares climbed 1.1% to 142.44 on Wednesday. Investors could view 146.44 as an early entry. The official buy point is 167.68.
ServiceNow earnings topped consensus forecasts. NOW stock nudged higher before the open. Shares edged up 0.2% on Wednesday to 583.35. ServiceNow stock closed in range from a 565.39 buy point via a double-bottom base.
Align earnings easily beat views, while the Invisalign maker also guided higher. ALGN stock rose nearly 2% to 63 in extended trade, signaling a move back above a 629.45 cup-with-handle buy point, according to MarketSmith analysis.
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Stock Market Rally
The stock market rally finished mixed on the major indexes, but leaders fared well while many sectors advanced.
Along with the Fed meeting and big earnings, further progress on finalizing an infrastructure bill was a positive headline. China stocks rebounding was positive, though it’s unclear if this is just a one-day respite.
The Dow Jones Industrial Average fell 0.4% in Wednesday’s stock market trading. The S&P 500 index closed down below break-even. The Nasdaq composite rose 0.7%, while the Nasdaq 100 climbed 0.4%. The small-cap Russell 2000 gained 1.5%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) popped 2.45%, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 0.8%. The VanEck Vectors Semiconductor ETF (SMH) rallied 1.8%, with AMD stock helping to lead the way.
SPDR S&P Metals & Mining ETF (XME) rose 1.2%, with CLF stock a top-10 holding. The Global X U.S. Infrastructure Development ETF (PAVE) was up 0.6%. U.S. Global Jets ETF (JETS) ascended 1.2%. SPDR S&P Homebuilders ETF (XHB) dipped 0.3%. The Energy Select SPDR ETF (XLE) climbed 0.9% and the Financial Select SPDR ETF (XLF) edged down 0.1%
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) popped 3.2% and ARK Genomics ETF (ARKG) 2.3%. ARKK rebounded from its 50-day line and just reclaimed its 200-day line. ARKG moved back above its 50-day line but remains below its 200-day.
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Market Rally Analysis
For growth investors, the stock market rally had a solid session Wednesday. The Nasdaq outpaced the Dow Jones and S&P 500, and it also did slightly better than the big-cap Nasdaq 100.
Tuesday’s night’s wave of earnings was strong but didn’t trigger major stock market swings. The Fed meeting and Fed chief Powell soothed investors but didn’t trigger mania either.
Meanwhile, a few new buying opportunities popped up, including AMD stock and CLF stock. Some stocks that fell on earnings rebounded from key support, including Shopify (SHOP), InMode (INMD) and especially Generac (GNRC).
The Russell 2000 led, an example of improved market breadth, at least for one session. However, the small-cap index remains below its 50-day line.
The Nasdaq 100 is 5.3% above its 50-day line, so it wouldn’t take much to get extended again. But the Nasdaq composite, at 3.9% above its 50-day, still has a little room to run.
The stock market rally has moved sideways so far this week, with the major indexes fractionally lower. That’s somewhat surprising given the earnings flood and other news headlines, but a welcome development. Combined with expanding market breadth and leading stocks leading, the overall picture is relatively positive for the market rally.
What To Do Now
This is a confirmed stock market rally, but it’s not a full-throated, fresh-faced bull market. It’s a time to be invested, but not overly aggressive.
There were a few buying opportunities on Wednesday, notably AMD stock. Investors could have taken advantage, or simply held onto their existing positions. The big money is made in the sitting. If you owned growth stocks, chances are you made money by sitting on Wednesday.
Continue to keep track of earnings dates for your holdings and key stocks on your watchlist.
Be flexible, stay alert and follow your rules.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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